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ENVIRONMENTAL DUE DILIGENCE

Groundwater contamination due diligence: Phase I and Phase II environmental site assessments

How Phase I and Phase II environmental site assessments uncover groundwater contamination before a property deal — ASTM E1527-21, All Appropriate Inquiries, RECs, and what happens when a plume is found.

By Argos Tellus · Updated

KEY TAKEAWAYS

  • A Phase I environmental site assessment (ESA) reviews records, site history and current conditions to identify recognized environmental conditions (RECs) — including likely groundwater contamination — without sampling.
  • EPA recognizes ASTM E1527-21 as satisfying the All Appropriate Inquiries (AAI) rule, 40 CFR Part 312, effective February 13, 2023; the older E1527-13 standard stopped qualifying on February 13, 2024.
  • Completing AAI before acquisition is a prerequisite for CERCLA landowner liability protections such as the bona fide prospective purchaser defense.
  • A Phase II ESA samples soil, soil gas and groundwater to confirm whether contamination exists and how far it extends.
  • When a plume is found, value and liability turn on its trajectory — whether it is expanding, stable or shrinking, and how long it will take to reach regulatory closure.

Why groundwater is the expensive part of environmental due diligence

Soil contamination is usually local and can often be excavated. Groundwater contamination moves: a plume can migrate beyond the property line, reach supply wells or streams, and require years of monitoring or active remediation. That makes it the largest source of open-ended cost in many property transactions — for buyers, lenders and sellers alike.

Common sources include leaking underground storage tanks at former gas stations, dry cleaners (chlorinated solvents), industrial operations, landfills and, increasingly, PFAS from firefighting foam and industrial use.

Phase I ESA: records, history and site reconnaissance

A Phase I ESA, performed under ASTM E1527-21, is a non-intrusive investigation by an environmental professional. It identifies recognized environmental conditions (RECs): the presence or likely presence of hazardous substances or petroleum products due to a release, or under conditions that pose a material threat of a future release.

  • Records review — federal, state and tribal environmental databases, including leaking UST and contaminated-site lists for the property and its surroundings.
  • Historical use — aerial photographs, fire insurance maps, city directories and topographic maps back to the property’s first developed use.
  • Site reconnaissance — visual inspection for tanks, staining, drums, vents, wells and other indicators.
  • Interviews — owners, occupants and local officials.
  • Findings — RECs, controlled RECs (CRECs, addressed but subject to controls) and historical RECs (HRECs, addressed to unrestricted-use standards).

All Appropriate Inquiries and CERCLA liability protection

Under the federal Superfund law (CERCLA), current owners can be liable for contamination they did not cause. Conducting All Appropriate Inquiries before acquiring a property — and meeting continuing obligations afterward — is a prerequisite for the innocent landowner, bona fide prospective purchaser and contiguous property owner protections.

EPA’s AAI rule (40 CFR Part 312) recognizes ASTM E1527-21 as compliant. EPA’s amendment took effect February 13, 2023, and reports prepared under the previous E1527-13 standard no longer satisfy AAI after February 13, 2024.

Phase II ESA: sampling soil, soil gas and groundwater

When a Phase I identifies a REC, a Phase II ESA tests it. Typical work includes soil borings, temporary or permanent monitoring wells, groundwater sampling for the suspected contaminants, and soil-gas sampling where vapor intrusion is a concern. Results are compared with applicable regulatory standards — federal maximum contaminant levels such as 0.005 mg/L for benzene, or state cleanup levels such as Texas TRRP protective concentration levels.

A Phase II answers whether contamination is present and roughly where. It usually does not answer what a buyer most needs to know next: where the contamination is going and how long it will last.

When groundwater contamination is found

Finding a plume does not have to end a deal, but it changes the questions. Buyers, lenders and sellers need to understand the plume’s extent (delineation), its trajectory (expanding, stable or shrinking), whether it threatens receptors such as supply wells or neighboring properties, the likely remedy, and the time and cost to regulatory closure.

  • Regulatory status — is the site in a state program with an assigned case, an approved remedy or an expected closure pathway?
  • Trajectory — do multi-year monitoring data show concentrations falling? Petroleum plumes often stabilize; PFAS and chlorinated solvent plumes often do not.
  • Cost and time to closure — the basis for price adjustments, escrows, indemnities or environmental insurance.
  • Data quality — are wells, sampling events and laboratory results complete and consistent enough to support a forecast?

Frequently asked questions

Does a Phase I ESA test groundwater?

No. A Phase I ESA is a non-intrusive review of records, site history and current conditions. Groundwater sampling happens in a Phase II ESA if the Phase I identifies a recognized environmental condition.

Which standard governs Phase I ESAs?

ASTM E1527-21. EPA recognizes it as satisfying the All Appropriate Inquiries rule (40 CFR Part 312), effective February 13, 2023; the earlier E1527-13 standard no longer qualifies after February 13, 2024.

What is a recognized environmental condition (REC)?

Under ASTM E1527-21, the presence or likely presence of hazardous substances or petroleum products in, on or at a property due to a release, the likely presence due to a release or likely release, or under conditions that pose a material threat of a future release.

Why does All Appropriate Inquiries matter?

Completing AAI before acquisition is required to qualify for CERCLA liability protections such as the bona fide prospective purchaser, innocent landowner and contiguous property owner defenses.

What happens if groundwater contamination is found during due diligence?

The parties typically delineate the plume, assess whether it is expanding or stable, confirm its regulatory status, and estimate time and cost to closure — then reflect that in price, escrows, indemnities or insurance.

HOW ARGOS HELPS

Polygon — plume forecasting

Per-well forecasts out to 20 years, delineation-well recommendations and a 20-year liability curve for petroleum plumes.

Data Vault — environmental data

Centralize sampling history, exceedance tracking and site comparison for diligence and portfolio review.

SOURCES

  1. U.S. EPA — What are “All Appropriate Inquiries”? (fact sheet)
  2. Holland & Knight — EPA recognizes ASTM E1527-21 as satisfying All Appropriate Inquiries rule (2022)
  3. Sive Paget & Riesel — EPA phases out ASTM E1527-13 for All Appropriate Inquiries
  4. U.S. EPA — How to evaluate alternative cleanup technologies for UST sites, Chapter IX: Monitored natural attenuation

Figures are taken from the primary sources above and dated as of the update shown. Concentrations are expressed in mg/L. Spot an error? Email support@argostellus.com.

RELATED GUIDES

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